Credo Technology Group shares tumbled 21% on Wednesday, sliding to $163.83 in afternoon trading after the company's fiscal first-quarter results drew a cautious reaction from Wall Street despite beating estimates. The decline extended a premarket drop of more than 9% that had already taken CRDO to its lowest level since July 30, leaving the stock down nearly 40% from its 2026 high of $308.30.
For the quarter ending August 1, Credo reported adjusted earnings per share of $1.20, surpassing the $1.17 consensus estimate. Revenue rose to $479 million, up 9.6% quarter over quarter and 114.7% year over year, above the $473 million analyst consensus and the $475 million high end of the company's guidance. GAAP gross margin climbed to 64.5%, and GAAP net income reached $129.4 million, up from $64 million a year earlier but down from $169 million in the prior quarter.
CEO Bill Brennan said the company's portfolio now spans connectivity from millimeters to kilometers, with solutions across optics and copper for AI data centers. However, Credo's current-quarter revenue guidance of $525 million to $535 million was seen as underwhelming. J.P. Morgan analyst Joseph Cardoso lowered his price target from $335 to $310, writing that the raised outlook is likely to disappoint, especially for optical-related revenue. Bank of America maintained a Buy rating but slashed its target from $340 to $275, citing slower growth in Credo's copper cable business. Mizuho kept an Outperform rating and suggested buying the pullback, though analyst Jordan Klein noted the beat and guidance looked a bit skinnier than prior quarters.
Valuation concerns added to the selloff: CRDO still trades at a forward GAAP price-to-earnings ratio of about 45, well above the technology sector median of 29 and higher than Dell and Nvidia. Technical indicators also point to further downside, with the stock below its 50-day and 100-day exponential moving averages and a bearish double-top pattern near the June highs. The next key level to watch is the 61.8% Fibonacci retracement around $171. Credo's customers include Amazon, Microsoft, and SpaceX, all of which have pledged to increase data center spending.
